Multifamily vs. Single Family – Which Real Estate Investment Is Better?

Multifamily vs. Single Family – Which Real Estate Investment Is Better?

Are you thinking about investing in multifamily rental properties but can’t decide if single-family is better? If so, you’ve come to the right place.

In this article, we will break down multifamily investment opportunities and provide you with reasons why they are better than single-family real estate investments.

Reasons Why Multifamily Properties Are Better Than Single-Family Investments

Reason #1 – Easier to finance than single-family homes.

The first reason to consider investing in a multifamily rental property is that they are easier to finance than single-family homes. This is because lenders know that if one tenant moves out of their unit there are other units in the building to cover the mortgage payment.

Besides being easier to finance, investors who are willing to “house hack”, also have the opportunity to live in one of their property’s units while renting out the others. With this strategy, an investor can utilize an FHA loan and get started with multifamily for thousands less than what they would pay to invest in a single-family.

Reason #2 – Economy of Scale

Besides being easier to finance in most cases than single-family homes, it’s also easier for an investor to scale their business and income with a multifamily property. How? The obvious reason is that more doors equal more income and with all of those doors being in the same building, it’s easier to build a highly profitable real estate investing business since all of the rentals that the investor will own are all located in one place.

Reason #3 – Efficiency

Let’s face it, as an investor you’re going to also be interested in efficiency, right? With multifamily investment properties, you can enjoy optimal efficiency because all of your units are located in one place. This also means that it’s going to be more efficient for you to provide electricity, trash, water/sewer or other utilities compared to having multiple rental properties spread out across town.

Apartment buildings often have a lower cost per door compared to single-family investment properties. This also means that they are easier for a property management company to manage and making repairs to one unit will benefit other units in the building.

Reason #5 – Demand

In 2019-2020 more renters than ever before want to live in multifamily rental properties because most renters don’t like to have the traditional responsibilities of home ownership like lawn care and they enjoy the freedom of being able to come or go as they please.

What is the difference between multifamily and single-family homes?

Multifamily properties are buildings that have one or more rental units in the building for individual renters or families to live. Single-family rentals are traditional homes that are located in urban areas. These properties usually have 2-3 bedrooms, one or bathrooms and a yard in the front or back of the house.

Is a multifamily a good investment?

Yes, as we stated above, multifamily properties make a great real estate investment because with more doors you can earn more income quickly. They are also easier to finance than single-family and offer investors a wide variety of other benefits.

How to analyze multifamily investment opportunities

During the process of reviewing a multifamily investment opportunity the best thing to do is ask yourself the following questions before investing in a new property.

  • What are the annual taxes?
  • Insurance costs?
  • Vacancy rates?
  • Are any repairs or renovations needed?
  • Does the property have any liens on it?
  • What are the current monthly utility costs?
  • What is the asking price?
  • How much will it cost to finance the property?
  • Property management costs?

The information in this article will provide you with enough data and tips for getting started as a multifamily real estate investor. If you have any additional questions about multifamily investing that we didn’t answer in this article please leave us a comment below!